Tuesday, 18 December 2012

Douglas Carswell muses on how the internet and the concept of licensing "intangible assets" enable companies to avoid paying taxes designed for a system of physical production (mines, factories) in today's City AM Forum, and concludes thusly:

"But if the tax base turns out to be a river that can flow away," you ask, "how are governments going to manage to raise revenue to pay for all the things that governments do?"

How indeed. Perhaps they won’t. Without a dependable tax base, maybe the era of Big Government is over.

How about taxing land values instead of turnover, income and profits? Costa Coffee trades from 700 shops; Google has offices and data centres (and their employees all have to live somewhere); the businesses who sell goods or services via Amazon or eBay still need somewhere to store their goods; they need parcel companies to deliver them, who have their own offices, warehouses and car parks etc etc. And if those premises are currently abroad (for whatever nefarious reasons) then let's build more suitable premises in this country and invite them all over.

Just for a giggle, I've emailed this post to theforum@cityam.com, feel free to have a go yourself.

He does like consumption taxes too I think... Large parts of his book are about how we can't keep taxing income and companies in the way we do now and that in the longer term this is a good thing because the tax base will be smaller meaning the state must be smaller.

If say, Microsoft was looking for somewhere to put a data center, instead of Dublin (presumably for the tax breaks), they could put it in Sunderland. Cheap staff (because of no tax), very low corporation tax, and the staff would still be incentivised to go and work on the data center.

(Despite the fact that data centers employ only a few handfuls of staff, they also require lots of subcontractors to do construction, maintenance, cabling etc).

You'd solve unemployment for many, create a load of wealth and wouldn't require all sorts of transfers of wealth into spastic regeneration schemes.

TS, exactly, that was the sub-text. Why warehouse stuff in Ireland and ship it to the UK when you can warehouse it in the tax-free UK? Such companies will work out the marginal extra profit of doing so and will be quite happy to pay anything less than that in rent.

Legalising Resale Price Maintenance (as in the USA and it looks like China) would put a stop to predatory discounting and sort out Amazon for good and all.Actually I don't feel sorry for retailers en masse because they lobbied for abolition of RPM in 1964 so they could put manufacturers out of business by setting prices in shops that suited themselves. Now they have been caught out by the same legislation.NB Helen Mercer in her masterly working-paper on Resale Price Maintenance for the LSE (on Net) compares the 1964 abolition of RPM to the 1846 abolition of the Corn Laws: the latter ko'd British agriculture ;the former ko'd manufacture.Now retail has been ko'd.What a way to run an economy.(Edward Heath abolished RPM because he wanted to join the EEC and it was banned by Treaty of Rome;re-banned by Treaty of Nice;banned again by Treaty of Lisbon)